Bush Lauds Economy for Its Resilience
Tuesday, January 8, 2008
President Bush gave a wide-ranging speech about the economy yesterday, but proposed no new policies to deal with the emerging economic distress. Instead, he asked Congress to take up various actions that have been mainstays of the administration's second-term economic policy.
Bush stressed that the economy has been resilient in responding to problems, an apparent rebuke to those who have predicted that the downturn in housing and financial markets will cause prolonged weakness.
"Over the last seven years, over the span of my presidency, we've had other challenges," Bush said in a speech at the Union League Club of Chicago. "We've been through a recession, terrorist attacks, corporate scandals, wars in Afghanistan and Iraq, as well as devastating natural disasters. . . . Every time our economy absorbed those shocks. We dealt with them, and managed to grow and prosper."
Bush acknowledged that economic indicators lately have been mixed -- the jobless rate in December rose to 5 percent, its highest level in two years. He also said that while measures of inflation excluding energy and food prices have been low, prices for gasoline and food have risen in the past year.
What he did not do was propose any government action to combat the immediate risks of a slumping economy. In a speech yesterday in New York, Treasury Secretary Henry M. Paulson Jr. said, "This will require patience as we thoughtfully evaluate next steps. Working through the current situation and getting the policy right is more important than getting the policy announced quickly."
Growing numbers of economists of varying political leanings have said that it might make sense to enact a temporary tax cut or spending increase to try to ease the damage of the housing and financial crises.
"There's a sense that Washington's not on the case," said John Silvia, chief economist for Wachovia and a former Republican staffer for the Joint Economic Committee of Congress. "You could imagine sending a $200 check to every household, or some targeted help for homeowners behind the eight ball on their mortgages, that could help the situation and could be passed quickly."
Democrats assailed Bush. "In his speech today, President Bush made clear he wants to maintain the status quo, one that experts from across the political spectrum agree has failed millions of America's working families," House Speaker Nancy Pelosi (D-Calif.) said in a statement.
Democratic congressional leaders have not, however, proposed a detailed program. They are assembling a package that is likely to include tax cuts and some new spending.
The specific policies Bush advocated in his speech deal more with the long-term competitiveness of the U.S. economy than the short-term risk of recession. He asked Congress to pass trade agreements with Colombia, Panama and South Korea, a long-standing goal of the administration's trade policy. He called for more investment in nuclear power as a way to deal with higher energy prices. He restated a request that tax laws be changed to make it easier for individuals and small businesses to get health insurance.
Bush also asked Congress to extend the tax cuts that he championed in his first term, which are scheduled to expire in the coming years and are a central goal of Bush's economic policy.
Economists said that whatever the merits of those policies, they would have little impact on the immediate risk of recession. "You've had a car accident, and this isn't the time to talk about rebuilding the street," Silvia said. "It's time to take care of the person that had the accident."
Paulson, in his speech, updated the status of his efforts to ease the crisis in the mortgage market. He said that a plan he engineered for mortgage servicers to freeze interest rates for certain subprime mortgage loans that are scheduled to reset is moving along, with the mortgage servicers, debt counselors and others working to build the infrastructure it will take to avoid unnecessary foreclosures. He said he is pushing the industry to move quickly.
"Final success of this plan will be measured by the number of avoidable foreclosures that are prevented, not by the number of refinancings or modifications with an interest rate freeze," Paulson told the New York Society of Securities Analysts.
He emphasized that it would take a variety of efforts to deal with the problems in the housing and financial markets. "No single policy or action will undo the excesses of the last few years," Paulson said.